The Clean Development Mechanism (CDM), defined in Article 12 of the Protocol, allows a country with an
emission-reduction or emission-limitation commitment under the Kyoto Protocol (Annex B Party) to implement an
emission-reduction project in developing countries. Such projects can earn saleable certified emission
reduction (CER) credits, each equivalent to one tonne of CO2, which can be counted towards meeting Kyoto
targets.

The mechanism is seen by many as a trailblazer. It is the first global, environmental investment and credit
scheme of its kind, providing a standardized emissions offset instrument, CERs.

A CDM project activity might involve, for example, a rural electrification project using solar panels or the
installation of more energy-efficient boilers.

The mechanism stimulates sustainable development and emission reductions, while giving industrialized
countries some flexibility in how they meet their emission reduction or limitation targets.

A CDM project must provide emission reductions that are additional to what would otherwise have occurred. The
projects must qualify through a rigorous and public registration and issuance process. Approval is given by
the Designated National Authorities. Public funding for
CDM project activities must not result in the diversion of official development assistance.

The mechanism is overseen by the CDM Executive Board,
answerable ultimately to the countries that have ratified the Kyoto Protocol.

Operational since the beginning of 2006, the mechanism has already registered more than 1,650 projects and is
anticipated to produce CERs amounting to more than 2.9 billion tonnes of CO2 equivalent in the first
commitment period of the Kyoto Protocol, 2008–2012.